US President Harry S Truman is reported to have said in anguish “Give me a one-handed economist. All my economists say on the one hand on the other”.
I wonder if this is really a fact, but it is probably true that economics is an inexact science, if you can call it that. And economists have been known to hedge their bets when it comes to predicting future trends. A few exceptions like Raghuram Rajan who went out on a limb to predict impending economic disaster well before the property bubble [2008 Lehman Brothers] collapse, do exist.
It is indeed refreshing to see in action an economist who says it as it is. Professor Richard Vietor’s [Dick Vietor to students] who taught the Advanced Management Program class at Harvard Business School is one such expert. He was known for being rather opinionated — backed by facts, of course. And his favorite statement was “This Country’s economy in in the toilet.’ He held back very little and was ready to argue with his highly knowledgeable senior management class drawn from over 60 countries.
I was reminded of Dick Vietor’s classes as I started reading Ruchir Sharma’s book ‘The Rise and Fall of Nations – Ten Rules of Change in the post-crisis world.’ Sharma is the head of emerging markets and global strategy at Morgan Stanley Investment Management and so he writes with a firm hand about global affairs and his book is anything but boring. He manages to pack a lot of interesting data, coupled with amusing anecdotes and historical information. But what makes the book special the personal touch that Sharma adds by talking about his travels and meetings with political and financial captains of the world.
The book’s ‘Ten Rules of Change in the Post-Crisis World’ are all not what you would expect them to be. There are several surprises.
For instance, take the chapter on the quality of billionaires and how it can predict the future economic success of a nation. Sharma explains in better performing nations you will see billionaires rise from high-tech industries and manufacturing, not just from petroleum and mineral resources; or the rule about the quality of the currency and its relative price. You would imagine that a cheap currency means the country is headed towards the ‘toilet’, but Sharma says a cheap currency can actually spell growth in the medium to long term.
Another such example is the chapter on how the media spin doctors are telling the story of a country. There is a prediction that if a country gets to the front page of numerous mass-circulated global magazines, contrary to popular wisdom, it may be headed down soon.
Some of the ten rules may be well known to the readers of this magazine. For instance, there is an advantage to having a populous skilled young nation, investment and savings are critical indicators for growth; economic reforms need to be sustained and cannot be abandoned after one or two terms in power and manufacturing is a critical job and wealth creator.
Sharma with his ten rules has predicted medium to long-term growth of several countries and regions. He has supported his arguments with data and observations. It is now left to be seen if his rules stand the test of time and if he gets labelled as a successful ‘one-handed economist’ who Truman would have loved having as his economic advisor.